New figures reveal near-doubling of firms self-reporting bribery to the SFO

New figures obtained by Pinsent Masons, the law firm behind Out-Law.com, has revealed a near-doubling in the number of companies to have self-reported cases of bribery to the Serious Fraud Office (SFO) in recent times.

In 2011/12 there were 12 cases of self-reporting compared with just seven such reports in the previous year, according to figures released by the SFO under freedom of information laws. Only two companies self-reported bribery in 2008/09.

Last year the SFO changed its policy on self-reporting to make it clear that businesses that flag up bribery cases they are embroiled in could still be prosecuted where there is a "reasonable prospect of conviction" and if it is "in the public interest" to pursue a criminal case. Previous SFO guidance suggested that companies which self reported instances of corruption would be looked on more favourably, and may receive civil penalties rather than criminal.

Under the Bribery Act businesses can be fined or prevented from bidding for Government contracts if they are found to have engaged in corrupt practices, whilst individuals within those firms can face imprisonment over the activities.

A company can be found to be responsible for bribery carried out by its employees without its knowledge or consent under the Act. The Act created a new offence of "failure to prevent" bribery by people working for or on behalf of a business, but companies can escape liability if they show that they have "adequate procedures" designed to prevent bribery in place.

Despite the SFO's adoption of stronger rules on self-reporting, anti-corruption expert Barry Vitou of Pinsent Masons said that it was important that companies are not disuaded from informing the SFO of cases where they suspect bribery has occurred. This is because the culture of 'whistleblowing' in the UK could undermine companies' attempts to hide wrongdoing and lead to greater punishments being levied, he said.

"The Bribery Act is already having a big impact on corporate attitudes towards rooting out and self-reporting white collar crime," Vitou said. "The harsh penalties associated with the Bribery Act have greatly increased the incentives for corporates to self-report rather than risk being caught out by a hostile SFO investigation. Self-reporting won’t let a corporate avoid prosecution, but it could help reduce the risk of receiving the most severe punishments. Corporates know they have a chance of limiting the damage if they’re up front with the SFO."

"Burying its head in the sand is not a long-term solution for a corporate that suspects wrongdoing. The SFO has plenty of sources of information at its disposal and is investing in intelligence, so the net can close in very quickly, with or without a company’s co-operation," he added.

"Corporates need to remember that the SFO might have information about wrongdoing in a corporate other than evidence from a self-report. The whistleblowing culture is alive and well, so corporates can’t assume that the SFO doesn’t know about something if they haven’t yet reported it," the expert said.

Vitou added that if companies do decide to "go down the road of self reporting" then it is "very important" that they "provide full and frank details of what they know so that the SFO has no reason to suspect a cover-up".

Companies that elect to self-report to the SFO must provide reports setting out the nature and scope of any internal investigations, as well as supporting evidence including copies of emails, banking records, and witness accounts.

“The SFO is playing hard ball on self-reporting," Vitou said. "The process is now a lot more robust and transparent, and it will be challenging for corporates to comply with the new rules.  The more rigorous process has been published after there were criticisms about deals done behind closed doors. The SFO attaches huge importance to self-reporting, but it can launch a prosecution with or without a self-report. The onus is on a corporate to come clean to the SFO if they want to have a chance of avoiding the heaviest sanctions, even if it means jumping through extra hoops."

The SFO received 3,265 letters, emails, or phonecalls to report financial crime between November 2011 and November 2012, according to figures released by the Solicitor General.

Last year research by Pinsent Masons discovered that the SFO had received more than 600 communications from whistleblowers concerned about corruption in the first three months of 2012. The SFO received 350 calls through its 'SFO Confidential' system between the beginning of January and the end of March 2012, according to the figures. SFO Confidential was closed in June 2012 for cost reasons.

In addition, almost a quarter (23%) of the 324 cases of whistleblowing of non-US financial crime recorded by the US Securities and Exchange Commission for the year to 30 September 2012 stemmed from UK sources. The UK was the most common source of tip-offs for crimes of that nature during the period, according to the regulator.